The Economic Journal

Clymo,, Alex;Lanteri,, Andrea

doi: 10.1093/ej/uez066pmid: N/A

Abstract We propose a theory of optimal fiscal policy with “Limited-Time Commitment” (LTC). In our framework, successive governments have commitment only over finite, overlapping horizons. We first show that key results in the Full Commitment (FC) literature can often be sustained with a single period of commitment. We then solve a calibrated model in which LTC fails to implement the FC policy, and find that one year (three years) of commitment recovers one third (two thirds) of the welfare losses relative to No Commitment. Finally, we investigate the tradeoff between commitment and flexibility in response to shocks. Footnotes * We thank the Editor Morten Ravn and two anonymous referees for comments that greatly improved the paper. We are very grateful to Albert Marcet for insightful conversations at all stages of this project. We also thank Marco Bassetto, Davide Debortoli, Wouter den Haan, Zhen Huo, Paul Klein, Sarolta Laczó, Ricardo Reis, Victor Ríos-Rull, and Pierre Yared, as well as seminar participants at the Bank of England, Duke TDM workshop, University of Amsterdam, IAE-CSIC/UAB (Barcelona) and EEA Conference 2016. Alessandro Villa provided excellent research assistance. All errors are our own. This content is only available as a PDF. © 2019 Royal Economic Society. Published by Oxford University Press on behalf of Royal Economic Society. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)

Hahn,, Youjin;Islam,, Asadul;Patacchini,, Eleonora;Zenou,, Yves

doi: 10.1093/ej/uez064pmid: N/A

Abstract We randomly assigned 115 primary schools in Bangladesh to one of two settings: children studying in groups with friends and children studying in groups with peers. The groups consisted of four people with similar average cognitive abilities and household characteristics. While the achievement of male students was not affected by the group assignment, low-ability females with friends outperformed low-ability females working with peers by roughly 0.4 standard deviations of the test score distribution. This is not due to the fact that friends tend to be of the same gender or to a higher frequency of interactions among friends. Footnotes * Corresponding author: Yves Zenou, Monash University, Department of Economics, Caulfield VIC 3145, Australia. † We thank the editor, two anonymous referees, Jim Berry, Jaesung Choi, Booyuel Kim, Vesall Nourani, Sangyoon Park, the seminar participants at Monash University, Queensland University of Technology, University of Queensland, University of New South Wales, Yonsei University, the 24th Annual SJE International Symposium: Human Capital and Economic Development, Korean Labor Economic Association Meeting, Korean International Economic Association Winter Meeting, Hanyang University, and the KDI School of Public Policy and Management for valuable comments. We are indebted to Behrooz Hassani-Mahmooei for his help in the early stages of the project. We are grateful for funding support from Monash University, Yonsei University and AusAID (DFAT). We thank the Department of Primary Education in the Ministry of Education of Bangladesh for its support in conducting this project. Angela Cools, Foez Mojumdar, Mujahid Islam, and Mahbub Sarkar provided excellent research assistance. This content is only available as a PDF. © 2019 Royal Economic Society. Published by Oxford University Press on behalf of Royal Economic Society. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)